Jul 4 Bad Company

As barbarian tribes besieged Rome from without, constant overspending and oppressive taxation weakened the empire from within. When wealthy Romans were faced with backbreaking taxation and an increasingly mismanaged government, they escaped to the countryside, and their egress only weakened the empire further. Though the barbarians are not quite at the gates, the burden of Obamacare continues to weigh on American enterprise.

The Affordable Healthcare Act was certainly well-intentioned, but it has been a disaster for the market — the state reached into the pockets of every American, then mismanaged the coffers. Rather than empower private enterprise in health care, Obamacare has hamstrung the market and thereby the consumer. At a time when facts and feelings conflate as the Senate works to concoct a new health bill, a reminder of the impact of Obamacare on American enterprise may provide some needed resolve to find a better way.

Under Obamacare, a full-time employee is anyone who works at least 30 hours a week, and businesses with 50 or more full-time employees are forced to provide health insurance or pay a fine of $2,000 per full-time employee. This mandate effectively made the mom-and-pop the battlefield for affordable insurance, so it follows that they would be among the most sensitive to rising health care costs.

Business owners were backed further into the corner with a penalty that essentially punished choice in how they covered or reimbursed employees. In the past, employers have offered individual rather than group coverage or have opted to reimburse employees for their medical expenses. Bill Bischoff of MarketWatch explains,

Employer-payment arrangements have long been a popular way for small employers to help workers obtain health coverage without the hassle and expense of furnishing a full-fledged company health-insurance plan. Under an employer-payment arrangement, the employer reimburses participating employees for premiums paid for their individual health-insurance policies or pays the premiums directly on behalf of participating employees.

Obamacare has put an end to that. Employers who do not provide mandated coverage for their employees face a $2,000 fine per worker per year. The Internal Revenue Service took it one step further. The IRS can issue fines of $100 per worker per day, up to $36,500 per worker per year, and with a maximum of $500,000 per organization. Rather than expanding coverage, this has had the opposite effect.

The National Federation of Independent Business (NFIB), a nonprofit whose membership is made up of small business owners, reported that before Obamacare passed in 2010, more than half of its 350,000 members offered health insurance to their employees. That number is now less than 30 percent. Given the sky-high costs of premiums, and depending on the number of employees in an organization, it may be more profitable in the long run for the employer to pay the fine, rather than to pay for expensive group medical insurance. In some cases, employees may lose out by being forced into employer provided group coverage. When employees enroll in employer provided group coverage, they miss out on subsidies that could have reduce their health insurance expenses, had they been enrolled under individual coverage instead.

Devoid of any legitimate reason to interfere with a system that had served employer and employee well, it appears that the government fears choice in the market. These penalties amount to nothing less than a power grab and an attack on voluntarism. Placing small business — the backbone of America — in a stranglehold does not serve the consumer well in any case.

In a 2015 survey of its 325,000 members, the NFIB further confirmed the fears employers expressed at the outset of Obamacare. Of those business owners surveyed, 63 percent experienced premium increases, while eight percent reported premium decreases.

The survey showed that of the 60 percent of employers who don’t offer health insurance, 52 percent cited cost as the primary reason that they don’t. Fifty-two percent of employers who offered Obamacare compliant insurance were resigned to lower net income.

The tax credits that were supposed to compensate for increasing costs have proven to be ineffective and unpopular. NFIB Research Director Holly Wade explains, “The tax credit is temporary but the mandate is forever, so the financial advantage is very small over the long run. It’s certainly not enough to offset the higher costs and the administrative headaches that the law imposes on small business owners.”

The tax credit program has been unpopular with small business owners, and this is reflected in fact that only three percent of all NFIB employers surveyed were interested in the Small Business Health Options Program (SHOP). Indeed, Kaiser Health News reported that in 2015, only 85,000 people had received coverage through SHOP, far fewer than the Congressional Budget Office’s projection of one million enrollees by 2015. Director Wade has commented, “Almost no one is using the system and that’s evident from the administration’s own enrollment numbers.”

Obamacare succeeded in providing subsidized health care of questionable efficiency. In doing so, the the state further bureaucratized the market and placed a heavier yoke on American enterprise. What began as an attempt to provide affordable care turned into an all-out assault on voluntary insurance when we were pigeonholed into bronze, silver, gold, and platinum health care plans. It is utterly illogical to insist on making employers the gatekeepers of affordable medical insurance. Burdening small business with heavy taxation rarely ends in a win for the consumer. In the words of Tiberius, “A good shepherd shears his sheep, he doesn’t flay them.”

Rather than punishing enterprises and taking choice out of the hands of consumers, the free market should be allowed to run its course, because it very well may be the cure to achieving affordable health insurance for all Americans.